1 | P a g e
June 25, 2014
IRS Announces Newly Modified Offshore Compliance Programs
The IRS has announced changes in two o...
2 | P a g e
a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoeve...
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IRS Announces Newly Modified Offshore Compliance Programs

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The IRS has announced changes in two of its programs related to offshore accounts. The IRS has modified the terms of the Offshore Voluntary Disclosure Program (OVDP), which allows individuals to avoid criminal prosecution if they disclose their foreign accounts and pay a substantial penalty

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Transcript of "IRS Announces Newly Modified Offshore Compliance Programs"

  1. 1. 1 | P a g e June 25, 2014 IRS Announces Newly Modified Offshore Compliance Programs The IRS has announced changes in two of its programs related to offshore accounts. The IRS has modified the terms of the Offshore Voluntary Disclosure Program (OVDP), which allows individuals to avoid criminal prosecution if they disclose their foreign accounts and pay a substantial penalty. In addition, the IRS has expanded the streamlined filing compliance process, or "streamlined procedures," which are aimed at U.S. taxpayers who have failed to disclose their foreign accounts but who are not willfully evading their tax obligations. These programs are part of a wider effort to stop offshore tax evasion, which includes enhanced enforcement, criminal prosecutions, and implementation of third-party reporting via the Foreign Account Tax Compliance Act (FATCA). Offshore Voluntary Disclosure Program The current OVDP is the successor to two prior temporary OVDP initiatives that were launched in 2009 and 2011. In 2012, the OVDP was made permanent until further notice. The three programs have caused more than 45,000 taxpayers to voluntarily come into compliance, paying about $6.5 billion in taxes, interest, and penalties. Under the terms of the 2012 OVDP, participants pay a penalty of 27.5 percent of the highest aggregate balance or value of offshore assets during the prior eight years. Somewhat lower penalties apply to some taxpayers. The 2014 modifications strengthen the OVDP program in several ways. The new program requires additional information from taxpayers applying to the program. The existing reduced penalties for certain non-willful taxpayers have been eliminated in light of the expansion of the streamlined procedures. Taxpayers must submit all account statements and pay the offshore penalty at the time of the OVDP application. Taxpayers are also allowed to submit voluminous records electronically rather than on paper. Finally, the offshore penalty is increased from 27.5 percent to 50 percent if, before the taxpayer's OVDP pre-clearance request is submitted, it becomes public that a financial institution where the taxpayer holds an account is under investigation by the IRS or the Department of Justice. Streamlined Procedures The original streamlined procedures, which took effect in 2012, were available only to nonresident non-filers. Submissions by taxpayers were subject to different degrees of review based on the amount of the tax due and the taxpayer's response to a "risk" questionnaire. The taxpayer was required to have $1,500 or less of unpaid tax per year. The streamlined procedures have been expanded to be available to a wider group of taxpayers, including certain U.S. residents. The $1,500 tax liability limitation has been eliminated, as has the risk questionnaire. The taxpayer is now required to certify that previous failures to comply were due to non-willful conduct. For eligible U.S. taxpayers residing outside the U.S., all penalties will be waived. For eligible U.S. taxpayers residing in the U.S., the only penalty will be a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets that gave rise to the tax compliance issue. Copyright © 2014, CCH INCORPORATED. All Rights Reserved. Contents of this publication may not be reproduced without the express written consent of CCH and CBIZ. To ensure compliance with requirements imposed by the IRS, we inform you that-unless specifically indicated otherwise-any tax advice in this communication (and any attachments) is not written with the intent that it be used, and in fact it cannot be used, to avoid penalties under the Internal Revenue Code, or to promote, market, or recommend to another person any tax related matter. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact
  2. 2. 2 | P a g e a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. CBIZ MHM is the brand name for CBIZ MHM, LLC and other Financial Services subsidiaries of CBIZ, Inc. (NYSE: CBZ) that provide tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly-traded and privately-held companies.

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